When bitcoin lost its position: Cryptocurrency uncertainty and the dynamic spillover among cryptocurrencies before and during the COVID-19 pandemic

This paper examines the dynamic spillovers among the major cryptocurrencies under different market conditions and accounts for the ongoing COVID-19 health crisis. We also investigate whether cryptocurrency policy (CCPO) uncertainty and cryptocurrency price (CCPR) uncertainty affect the dynamic connectedness. We adopt the Quantile-VAR approach to capture the left and right tails of the distributions corresponding to return spillovers under different market conditions. Generally, cryptocurrencies show heterogeneous responses to the occurrence of the COVID-19 pandemic. We find that the total spillover index (TCI) varies across quantiles and rises widely during extreme market conditions, with a noticeable impact of the COVID-19 pandemic. Bitcoin lost its position as a dominant “hedger” during the health crisis, while Litecoin became the most dominant “hedger” and/or “safe-haven” asset before and during the pandemic period. Moreover, our analysis shows a significant impact of market uncertainties on total and net connectedness among the five cryptocurrencies. We argue that the COVID-19 pandemic crisis plays a vital role on the relationship between CCPO as well as CCPR and the dynamic connectedness across all market conditions.     

The Eurozone banking sector in the time of COVID-19: Measuring volatility connectedness

This article investigates the volatility connectedness of the Eurozone banking system over the last 15 years (from 2005 to 2020). Applying the Diebold-Yilmaz Connectedness Index model to the daily stock return volatilities of 30 major Eurozone banks, we are able to measure the risk spillover effects and to capture the COVID-19 outbreak's impact on banking stability. The empirical findings show that the 30 banks are highly interconnected. Furthermore, we show the strong impact of the COVID-19 pandemic on the volatility dynamics, i.e., on the structure of the Eurozone banking system. Dynamically, we find that volatility connectedness increases during crises, reaching its maximum peak at the time of COVID-19. The analysis points out the critical role of volatility transmission played by large banks, highlighting the “too-big-to-fail” characteristic of this banking system. However, we find that small-medium banks are important actors of contagion, supporting the thesis that the Eurozone banking system is also “too-interconnected to fail.” Finally, we document the heterogeneity effect of the COVID-19 pandemic between Eurozone banking systems. This heterogeneity impact could be a future source of financial instability within the Eurozone.     

The financial impact of COVID-19: Evidence from an event study of global hospitality firms

This paper examines the daily abnormal stock price returns of a sample of 154 publicly-traded hospitality firms from 23 different countries representing over $400 billion in combined market capitalization around the time that COVID-19 was first viewed by stock market participants as a major—possibly even existential—threat. The findings of the study suggest that, financially, hotels performed better than restaurants, which themselves performed better than casinos. These findings are consistent with medical recommendations concerning the relative safety of various hospitality-related activities and, therefore, also with the tenets of financial market efficiency in the hospitality sector. Additional findings suggest that hospitality firms with strong balance sheets and income statements characterized by relatively low leverage ratios, high market value (consistent with a “too big to fail” mentality), and higher price/earnings ratios (implying higher relative profitability) all fared better than smaller, weaker firms. Although, in no case, did Bloomberg's proprietary environmental, social, and governance (ESG) variable possess any predictive power, variables reflecting cross-country cultural differences support Huynh’s (2020) finding that “individualism” was an important factor in explaining the economic impact of the COVID-19 pandemic on hospitality firms.     

Innovation as recovery strategy for SMEs in emerging economies during the COVID-19 pandemic

The quarantine and disruption of non-essential activities as measure to contain the COVID-19 pandemic has negatively affected all economies around the World. This has had a deeper impact on small and medium enterprises (SMEs) in emerging economies because they have very limited resources and vulnerable supply chain and business-to-business/business-to-clients relationships. In this context, it is expected that after the pandemic many of these enterprises will disappear as the “new normality” will require changes in business and infrastructure management. To reduce this risk, innovation is identified as a key aspect of business recovery in the ongoing and post-COVID-19 pandemic period. This work presents a multidisciplinary methodological approach to guide these enterprises to innovate their products for new markets and making a better use of their limited available resources. As an example of this approach, the research-supported development of a new product for a family-owned SME was performed in a zone with high COVID-19 risk. The results provide insight regarding innovation as a survival tool for SMEs during and after the COVID-19 contingency, and the use of digital resources is identified as the main facilitator for networking and research-based design of innovative products within the “social distance” context.     

Does economic policy uncertainty drive the dynamic spillover among traditional currencies and cryptocurrencies? The role of the COVID-19 pandemic

The paper examines the dynamic spillover among traditional currencies and cryptocurrencies before and during the COVID-19 pandemic and investigates whether economic policy uncertainty (EPU) impacts this spillover. Based on the TVP-VAR approach, we find evidence of spillover effects among currencies, which increased widely during the pandemic. In addition, results suggest that almost all cryptocurrencies remain as “safe-haven” tools against market uncertainty during the COVID-19 period. Moreover, comparative analysis shows that the total connectedness for cryptocurrencies is lower than for traditional currencies during the crisis. Further analysis using quantile regression suggests that EPU exerts an impact on the total and the net spillovers with different degrees across currencies and this impact is affected by the health crisis. Our findings have important policy implications for policymakers, investors, and international traders.     

Risk contagion of COVID-19 in Japanese firms: A network approach

The novel coronavirus disease (COVID-19) is one of the worst pandemics in human history. Our research objective is to assess the contagion effect on Japanese firms and to evaluate the Japanese government's COVID-19 measures during the period from April 7, 2020, to May 25, 2020. We propose a susceptible-infected-recovered-dead model for COVID-19 and derive COVID-19 parameters for Japan. Subsequently, we analyze the effect of COVID-19 on Japanese firms through correlation-based network and credit risk analyses. The main findings are that the Tokyo Stock Price Index moved in the opposite direction of COVID-19 parameters and COVID-19 parameters are almost the only risk factors that impact a firm's credit risk during the period. Finally, we find that the interconnection analysis between the COVID-19 infection network and the financial networks contribute to the existing pandemic risk management knowledge.     

Corporate immunity,national culture and stock returns: Startups amid the COVID-19 pandemic

Small and medium-sized firms, particularly startups, are highly vulnerable to the COVID-19 pandemic because of their financial instability. Using a sample of listed startups across four countries, we investigate whether a startup's built-up capacity pre-COVID-19 can stimulate corporate immunity to endure the impact of the COVID-19 pandemic, reflected via stock performance. We find that the increase in the accumulated COVID-19 confirmed cases worsens stock returns and that the negative effect is alleviated if startups are greater in size as well as have low debt, large board size and CEO duality. Moreover, national cultural dimensions significantly moderate the relationship between stock returns and COVID-19. The COVID-19 negative impact is relieved in societies where people are more collectivistic and cooperative, less tolerant towards uncertainty, and more long-term oriented. Overall, our results support the consolidation of corporate capacities and suggest policymakers consider national culture when formulating COVID-19 or similar infectious pandemic strategies.     

An exploratory study on the impact of COVID-19 on U.S. State boards of accountancy

In the United States (U.S.) individual state boards of accountancy govern the accounting profession within each state. When COVID-19 struck the U.S., state boards worked to maintain normal operations. This study examines how COVID-19 affected the regulatory and oversight activities of the state boards of accountancy and the ways in which boards adapted to the pandemic. We interview executive directors from 21 state boards to determine the pandemic’s impact on board operations and continuing professional education requirements. We also evaluate whether state boards implemented guidance from parties such as the National Association of State Boards of Accountancy (NASBA), and the resources boards had available to navigate the pandemic. Finally, we examine our analyses and findings through the lens of institutional theory. In doing so, we describe how state boards’ individual reactions to the pandemic resulted in a largely homogenous response, as affected by coercive, mimetic, and normative isomorphic mechanisms.     

Starts and refutations of the Covid-19 rumors: Evidence from the reaction of the stock market

By manually collecting data on Internet-based rumors concerning COVID-19, we investigate the market reactions to the spread of such rumors and the government’s refutation of them. We find that frightening (reassuring) rumors have a negative (positive) impact on investors. The refutation of frightening rumors triggers a positive market response, whereas the refutation of reassuring rumors does not cause a significant market reaction. Further analysis shows that there is a stock price drift when frightening rumors are refuted by governments. Our conclusions remain robust after considering endogeneity. Our findings support the notion that epidemic-related rumors affect investors’ decisions, which add to literatures of the market responses of companies in the context of the COVID-19 pandemic and provide incremental evidence for the “the spiral of silence” theory.     

Asymmetric nexus between COVID-19 outbreak in the world and cryptocurrency market

In the wake of recent pandemic of COVID-19, we explore its unprecedented impact on the cryptocurrencies' market. Specifically, we check how the changing intensity of the COVID-19 represented by the daily addition in new infections worldwide affects the daily returns of the top 10 cryptocurrencies according to the market capitalization. The results from Quantile-on-Quantile Regression (QQR) approach reveal that the changing intensity levels of the COVID-19 affect the Bearish and the Bullish market scenarios of cryptocurrencies differently (asymmetric impact). Additionally, there are differences between these currencies in their responses to the changing levels of this pandemic's intensity. Most of the currencies absorbed the small shocks of COVID-19 by registering positive gains but failed to resist against the huge changes except Bitcoin, ADA, CRO, and up to some extent Ethereum. Our results reveal new and asymmetric dynamics of this emerging asset class against an extremely stressful and unpredictable event (COVID-19). Moreover, these results are robust to the use of alternative proxy (COVID-19 deaths) for pandemic intensity. Our findings help to improve investors and policymakers' understanding of the cryptocurrencies' market dynamics, especially in the times of extremely stressful and unseen events.     

Does CSR matter in times of crisis? Evidence from the COVID-19 pandemic

The debate over how firm stakeholder engagement is tied to preserving shareholder wealth has received growing attention in recent years, especially in the wake of the COVID-19 crisis. Against this backdrop, we examine the relation between corporate social responsibility (CSR) and stock market returns during the COVID-19 pandemic-induced market crash and the post-crash recovery. Using a sample of 1750 U.S. firms and two major sources of CSR ratings, we find no evidence that CSR affected stock returns during the crash period. This result is robust to various sensitivity tests. In additional cross-sectional analysis, we find some supporting evidence, albeit weak, that the relation between CSR and stock returns during the pandemic-related crisis is more positive when CSR is congruent with a firm's institutional environment. We also find that Business Roundtable companies, which committed to protecting stakeholder interests prior to the pandemic, do not outperform during the pandemic crisis. We conclude that pre-crisis CSR is not effective at shielding shareholder wealth from the adverse effects of a crisis, suggesting a potential disconnect between firms' CSR orientation (ratings) and actual actions. Our evidence suggests that investors can distinguish between genuine CSR and firms engaging in cheap talk.     

Corporate Social Responsibility Amid Social Distancing During the COVID-19 Crisis: BRICS vs. OECD Countries

This paper compares today’s corporate management in developing markets (BRICS countries) vs. developed markets (the OECD countries). The influence of determining a new social corporate management season considering social distancing amid the COVID-19 pandemic on emerging markets' economic growth is ascertained and set apart from corporate management in developing markets. This paper helps clarifying and better understanding the role of corporate social responsibility in the conditions of an economic crisis against the background of the COVID-19 pandemic. This work provides scientific arguments that allow solving critical discussions regarding the advantages (growth of quality of life, an increase of business's competitiveness) and costs (limitation of economic growth, non-commercial use of profit, and increased price for goods and services) of domestic production and consumption. In the long-term, responsible financial practices return all investments and allow countries to better cope with a crisis. The research supplies a new view of corporate social responsibility as a measure of crisis management. It reflects its advantages at a time of social distancing in the conditions of the COVID-19 pandemic. The institutionalization of corporate social responsibility in emerging countries is not predetermined by internal factors (approach to doing business or organizational culture), if not by external factors (market status, state regulation, and consumer awareness). These circumstances prove the high complexity of strengthening corporate social responsibility in developing countries. In the conditions of social distancing – due to the COVID-19 pandemic – corporate social responsibility goes to a new level. In both developing and developed countries, one of the most widespread manifestations of corporate social responsibility is the entrepreneurship's transition to the remote form of activities. This envisages the provision of remote employment for workers and the online purchase of goods and services for consumers.     

Pandemic-induced fear and stock market returns: Evidence from China

We construct a pandemic-induced fear (PIF) index to measure fear of the COVID-19 pandemic using Internet search volumes of the Chinese local search engine and empirically investigate the impact of fear of the pandemic on Chinese stock market returns. A reduced-bias estimation approach for multivariate regression is employed to address the issue of small-sample bias. We find that the PIF index has a negative and significant impact on cumulative stock market returns. The impact of PIF is persistent, which can be explained by mispricing from investors' excessive pessimism. We further reveal that the PIF index directly predicts stock market returns through noise trading. Investors' Internet search behaviors enhance the fear of the pandemic, and pandemic-induced fear determines future stock market returns, rather than the number of cases and deaths caused by the COVID-19 pandemic.     

Disparities Old and New in US Mental Health during the COVID-19 Pandemic*

The COVID-19 pandemic has reduced well-being and economic security on a number of dimensions, likely worsening mental health. In this paper, we assess how mental health in the US population has changed during the pandemic. We use three large, nationally representative survey sources to provide a picture of mental health prior to and during the pandemic. We find dramatic but broad-based declines in the level of mental health from pre-pandemic baseline measures across both people and places. Rates of poor mental health have jumped roughly 25 percentage points, from a base of roughly one-third. We document substantial disparities in mental health but show that the pandemic has generally preserved, rather than widened, these. Significant worsening in relative mental health among Hispanics and respondents aged 30 and older are exceptions. Consistent with an important role for pandemic-specific shocks, We find that income loss, food insecurity, COVID-19 infection or death in one's close circle, and personal health symptoms are all associated with substantially worse mental health. If anything, the decline in mental health is worsening as the pandemic wears on and is becoming less related to local COVID-19 case rates.     

Predicting stock returns in the presence of COVID-19 pandemic: The role of health news

This study derives its motivation from the current global pandemic, COVID-19, to evaluate the relevance of health-news trends in the predictability of stock returns. We demonstrate this by using data covering top-20 worst-hit countries, distinctly in terms of reported cases and deaths. The results reveal that the model that incorporates health-news index outperforms the benchmark historical average model, indicating the significance of health news searches as a good predictor of stock returns since the emergence of the pandemic. We also find that accounting for “asymmetry” effect, adjusting for macroeconomic factors and incorporating financial news improve the forecast performance of the health news-based model. These results are consistently robust to data sample (both for the in-sample and out-of-sample forecast periods), outliers and heterogeneity.     

Effects of investor sentiment and country governance on unexpected conditional volatility during the COVID-19 pandemic: Evidence from global stock markets

This paper first investigates the relationship between investor sentiment, captured by internet search behaviour, and the unexpected component of stock market volatility during the COVID-19 pandemic. According to data on 12 major stock markets, our research indicates a positive correlation between the Google search volume index on COVID-19 and the unexpected volatility of stock markets. The result suggests that greater COVID-19-related investor sentiment during this pandemic is associated with higher stock market uncertainty.Our study further examines whether country-level governance plays a role in protecting stock markets during this pandemic and reveals that the unexpected conditional volatility is lower when a country's governance is more effective. The impact of investor sentiment and country governance on unexpected volatility after the initial shock of COVID-19 is also investigated. The findings demonstrate the importance of establishing good country-level governance that can effectively reduce stock market uncertainty in the context of this pandemic, and support continual policy development related to investor protection.     

Gold or Bitcoin,which is the safe haven during the COVID-19 pandemic?

This study compares the dynamic spillover effects of gold and Bitcoin prices on the oil and stock market during the COVID-19 pandemic via time-varying parameter vector autoregression. Both time-varying and time-point results indicate that gold is a safe haven for oil and stock markets during the COVID-19 pandemic. However, unlike gold, Bitcoin's response is the opposite, rejecting the safe haven property. Further analysis shows that the safe-haven effects of gold on the stock market become stronger when the pandemic critically spreads.     

Investor attention and global market returns during the COVID-19 crisis

The financial market response to the COVID-19 pandemic provides the first example of a market crash instigated by a health crisis. As such, the crisis provides a unique setting in which to examine the market response to changes in investor attention. We utilise Google search volume (GSV) as a proxy for investor attention. GSV for the “coronavirus” keyword increases markedly from late-February and peaks in mid-March before declining substantially. Our results are broadly consistent with Da, Engelberg, and Gao (2015), indicating that GSV is primarily a proxy for the attention of retail investors and confirming that investor attention negatively influences global stock returns during this crisis period. A rise in the number of internet searches during the COVID-19 crisis induces a faster rate of information flow into financial markets and so is also associated with higher volatility. The identified relationships are economically and statistically significant even after controlling for the number of COVID-19 cases and macroeconomic effects. Increases in GSV have less impact on government bond yields where the limited role of GSV is likely due to lower participation of retail investors. The results suggest that, rather than searching for information on potential stocks to buy (Barber & Odean, 2008), retail investors are searching for information to resolve uncertainty about household FEARS (Da et al., 2015) during the COVID-19 crisis.     

Geographical diversification using ETFs: Multinational evidence from COVID-19 pandemic

We examine the relations between dollar flows of U.S. listed ETFs with exposure to the U.S., Europe, Asia, and the rest of the world following an emergency like the COVID-19 crisis. Using a Markov Switching Model (MSVAR), we find evidence that investors use ETFs to gain exposure to foreign markets and swiftly adjust their portfolio's allocation in response to the change in the number of COVID-19 infected people in every location. We further extend our study to ETFs listed in the U.S., Europe, and Asia and investigate the change in foreign and domestic money flow, before and after the pandemic. We show that investors around the world rebalance their portfolios by monitoring the countries’ performance in controlling the pandemic. Our findings show that while investors in the U.S. and Asian countries direct their money to domestic funds and reduce their foreign investment following the pandemic, European investors increase foreign investment and reduce home bias. This is consistent with the flight-to-safety effect when investors shift their asset allocation away from riskier investments (here riskier locations) and into safer ones during the adverse economic shock.     

Sovereign credit ratings during the COVID-19 pandemic

Using 603 sovereign rating actions by the three leading global rating agencies between January 2020 and March 2021, this paper shows that the severity of sovereign ratings actions is not directly affected by the intensity of the COVID-19 health crisis (proxied by case and mortality rates) but through a mechanism of its negative economic repercussions such as the economic outlook of a country and governments' response to the health crisis. Contrary to expectations, credit rating agencies pursued mostly a business-as-usual approach and reviewed sovereign ratings when they were due for regulatory purposes rather than in response to the rapid developments of the pandemic. Despite their limited reaction to the ongoing pandemic, sovereign rating news from S&P and Moody's still conveyed price-relevant information to the bond markets.